Weather Forecast

Angel fund bill on its way to Burgum

BISMARCK — The program that provides angel fund investors an income tax break would have greater protections against abuses under a bill the North Dakota Legislature sent to Gov. Doug Burgum this week, a state senator said Tuesday, April 11.

Lawmakers from both chambers reached a compromise on House Bill 1045 in a conference committee last week. It was passed by the Senate unanimously Monday after the House approved it Friday.

The bill replaces the existing program with a new "angel investor income tax credit program," according to a fiscal note prepared by the Office of the State Tax Commissioner. Current law will continue to apply to investments made before July 1 in angel funds organized by that date.

Sen. Dwight Cook, R-Mandan, who chairs the Senate Finance and Taxation Committee, said the bill adds new reporting requirements and makes the tax credit available only once an angel fund puts the money at risk in a company. It also adds penalties, he said.

The bill came after lawmakers discovered what they saw as violations of the angel fund law, namely a prohibition on investing in real estate projects.

"Over the interim, we found numerous things that I think embarrassed us," Cook said.

Angel fund tax credits became a campaign issue during the heated Republican primary race between Attorney General Wayne Stenehjem and Burgum. A Stenehjem campaign official at the time said Burgum, a co-founder a venture capital firm, was a "poster child" for out-of-state investments by angel funds.

Burgum said at the time that angel funds incentives "have room for improvement" and he supported "making adjustments to provide more focus on in-state investments."

The bill lawmakers sent to Burgum this week provides a 35 percent credit for an investment in an in-state business and a 25 percent credit for investments in out-of-state companies. To maintain eligibility for the credit, at least half of the money an angel fund invests must be into in-state qualified businesses, according to the fiscal note.

An angel fund investor is limited to a $45,000 credit in a year.

Originally, the bill discontinued the angel fund credit and expanded another program, the seed capital credit. Cook said Tuesday there was effort from "the good actors" to save the angel fund program, and he said the governor "showed his support for angel funds."

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.